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Business (LC) > Chapter 21 - Getting Started In Business > Flashcards

Chapter 21 - Getting Started In Business Flashcards

1
Q

What is a sole trader?

A

A business owned and run by one person. Entrepreneur makes all decisions

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2
Q

What are the advantages and disadvantages of a sole trader?

A
  1. Easy to set up
  2. Keep all the profits
  3. Decision making
  4. Confidentiality - don’t have it publish financial accounts
  5. Unlimited liability - owner personally responsible for debts
  6. No continuity of existence
  7. Stress
  8. Lack of capital
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3
Q

What the cro?

A

Companies registration office

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4
Q

What does the cro do?

A

The incorporation of companies (register new companies)
Receipt and registration of relevant documents required to set a business
Making information available to the public

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5
Q

What is a partnership?

A

A business with between two and twenty partners

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6
Q

What is self assessment income tax?

A

Tax paid on profits of shareholders in a partnership company

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7
Q

What is a business name?

A

A trading name that differs from the names of the persons or the Organisation who own the business

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8
Q

What are the advantages and disadvantages of a partnership?

A
  1. Easy to set up
  2. Decision making
  3. Increased capital
  4. Confidentiality
  5. Unlimited liability
  6. Profits are shared
  7. Decision making is slow
  8. Legal entity (the partners can be sued not the business)
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9
Q

What is a deed of partnership/partnership agreement?

A

A legal agreement signed by all partners that sets out the rules of the partnership on all matters

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10
Q

What is a private limited company?

A

A form of business that has between 1 and 149 shareholders

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11
Q

What are the advantages and disadvantages of a private limited company?

A
  1. Limited liability
  2. Continuity of existence
  3. Separate legal entity
  4. Taxation - pays corporation tax of 12.5% which is less than self assessment income tax
  5. Expensive to set up
  6. Profits are shared
  7. Less confidentiality
  8. Time - needs a certificate of incorporation to start trading
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12
Q

What is a certificate of incorporation?

A

The cro receives and processes all relevant documents required to set up a company

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13
Q

What is a co operative?

A

Type of business that is set up, owned and controlled by members rather than shareholders. Registers with the registry of friendly societies

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14
Q

What are the four types of co operatives?

A

Producer co operatives
Worker co operatives
Community co operatives
Financial co operatives

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15
Q

What are the advantages and disadvantages of a co operative?

A
  1. Limited liability
  2. Taxation
  3. Continuity of existence
  4. Democratic decision making
  5. Lack of capital
  6. Registration is complex
  7. Profits are shared
  8. Confidentiality
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16
Q

What are 7 factors affecting location of a business?

A

Employees - access to wide range of suitably qualified staff
Market - access to customers, knowledge of competitors
Local environment - clean, healthy, safe, positive support from community
Raw material - access to raw materials
Government - politically stable government, low corruption
Land - affordable land and buildings available to rent
Infrastructure - well developed transport links, good broadband

17
Q

Give examples of finance available for start ups.

A

Short term - bank overdraft, accrued expenses, trade credit
Medium term - medium term loan, hire purchase, leasing
Long term - debenture, grants, equity capital

18
Q

What are the 3 methods of production?

A

Job production
Batch production
Flow (mass) production

19
Q

What is Job production?

A

Unique item made to consumers specifications, high quality, needs highly skilled staff, high selling price e.g. tailor made clothes

20
Q

What is batch production?

A

Limited number of identical items are made in a production run, goods are produced for stock, less skilled workforce, lower selling price e.g. bread

21
Q

What is a production run?

A

The machinery in a factory is set up to make one product. When the product is finished, the production run is over and needs to be reset

22
Q

What is mass production?

A

Identical items are made continuously, goods made for stock, unskilled employees, low pay, low selling price e.g, pens

23
Q

What are implication of changing production methods?

A

Investment - batch and mass require automated machinery so one must invest in it
Finance - more finance needed
Ownership structure - may have to change in order to obtain finance
Changes to stock control - develop a stock control system
Marketing plan - new one made

24
Q

What is subcontracting/outsourcing?

A

A business employs another firm to manufacture part of a product

25
Q

What are the advantages and disadvantages of outsourcing?

A
  1. Cost savings
  2. Staff savings
  3. Meet demand
  4. Less bureaucracy (no responsibility for employment law)
  5. Loss of control
  6. Industrial relations (fear job security)
  7. Competition
26
Q

What is a business plan?

A

A detailed written document which includes information about the business e.g. objectives, strategies

27
Q

What are 4 reasons to prepare a business plan?

A

To obtain finance
To measure performance
To identify problems (e.g. lack of finance)
To formulate strategies (sets out steps to achieve goals)

28
Q

What are the elements to a business plan?

A 
Business details
Objectives
Product details
Production details
Market details
Financial details
29
Q

What does a business plan not plan for?

A

Unexpected events
Changes in taste
Competition
Economy

30
Q

Why are employees interested in a business plan?

A

Job security

Future promotion

31
Q

Why are investors (equity) interested in a business plan?

A

Sales figures

Market research findings

32
Q

Why are financial institutions interested in a business plan?

A

Assess whether they can make repayments

33
Q

Why are managers interested in a business plan?

A

Used as a benchmark

34
Q

Why are suppliers interested in a business plan?

A

Examine if a business can repay goods sold on credit

35
Q

Why are government agencies interested in a business plan?

A

Assess whether they qualify for financial assistance

36
Q

What are challenges for a new business?

A 
Deciding an ownership structure
Obtaining finance
Deciding on a production method 
Staff recruitment
Competition
37
Q

Why do new business fail?

A 
Poor management
Insufficient funds 
Poor location 
Poorly prepared business plan 
Expanding too fast

Business (LC) (23 decks)

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